Abu Dhabi-based Etihad Airways on Wednesday got approval from the Competition Commission of India (CCI) for purchase of a 50.1 per cent stake in Jet Privilege Private Ltd (JPPL), a customer loyalty programme unit of Jet Airways.
Clearing the transaction by majority, fair trade regulator CCI said that the deal was unlikely to have any adverse impact on market competition, as Etihad's purchase of a 24 per cent stake in Naresh Goyal-led Jet Airways has already been approved and the two carriers were already partners in their respective frequent flyer programmes.
Under such customer loyalty programmes, airlines generally offer certain benefits to their frequent flyers.
Dissenting with this majority order, passed by CCI chairman Ashok Chawla and four members, one member Anurag Goel, however, said that the proposed deal was "likely to raise appreciable adverse effect on competition in the international air passenger transportation market, more particularly in those routes between India and Abu Dhabi".
"A notice may, therefore, be issued to show cause to the parties to the combination calling upon them to respond within thirty days of the receipt of the notice, as to why investigation in respect of the proposed combination should not be conducted," his minority order said.
Incidentally, Mr Goel had also dissented with the clearance given to Etihad's purchase of 24 holding in Jet through a majority order, which was passed by CCI in November 2013.
However, the acquisition faced numerous regulatory roadblocks and one petition against this deal is still before the Supreme Court, while market watchdog Securities and Exchange Board of India (Sebi) also began having a fresh look at the deal after certain observations were made by CCI with regard to the level of control and rights being granted to Etihad.
CCI also imposed a fine of Rs one crore on Etihad in December 2013 for non-disclosure of certain information on time, although this penalty has no impact on its approval.
Irrespective of these developments, in its majority order passed on Wednesday, the regulator said, "Considering that Jet and Etihad are already frequent flyer partners and the Commission had approved their earlier combination... Etihad's acquisition of 50.1 percent stake in JPPL is not likely to raise any appreciable adverse effect on competition."
Under this deal, Etihad will acquire a 50.1 per cent stake in JPPL subsequent to the hiving off of Jet's loyalty business into the subsidiary on a going concern basis.
However, valuation of this deal has not been disclosed.
Jet and JPPL have entered into a 'Slump Sale Agreement' and 'Commercial Agreement' on November 19, 2013 for the purpose of hiving-off the airline's loyalty business into JPPL and to establish a commercial relationship between them.
CCI was approached for its clearance by Jet and Etihad for this frequent flyer business deal on December 18, 2013. CCI asked them on December 24 to remove certain defects and provide additional information by January 2, 2014.
After seeking extension of time, Etihad filed its response on January 13, 2014, CCI said.